Update Your Scorecard to Win
Tax season is sending loan volumes soaring, making right now the ideal time to freshen up your scorecards. It’s a smart, cost-effective way to better maximize every opportunity that walks through the door enabling you to win more customers without taking on more risk.
So, where do you start? Here are a few ideas to consider:
Deals you should have captured
First, you need to know what to change. This is where a business intelligence tool such as Equifax Lost Sales Analysis (LSA) becomes invaluable. It helps you determine your competitive position in the marketplace by allowing you to carefully look back across the deals you’ve lost and measure how they’re performing with other lenders.
By clearly seeing the terms that customers were booked under, you can compare that to the offer you extended them. You’ll see what’s working, and what’s not, across the marketplace and your own loan offers. From there, you can build a solid data-driven strategy for moving forward with scorecard modifications.
Expanding your market without increasing risk
A risk score is an important part of the lending decision, but it doesn’t have to drive all decisions. Go beyond just a credit score when determining loan rates. Variables such as payment-to-income (PTI) and loan-to-value (LTV) are levers you can use to adjust your risk settings or decisioning criteria. By looking beyond just a credit score, you can achieve a better balance between risk and reward making more competitive and confident offers to more consumers while maintaining your business risk objectives.
Equifax can help you incorporate PTI, LTV and other fields, so you’ll get increased flexibility when updating your scorecard:
- Loan-to-value (coming soon)
For example, if your maximum LTV is 120 percent, LSA might reveal that competitors have conditions of up to 125 percent, yet their loans appear to perform similar to loans in the 115 percent to 120 percent range. Based on this insight, revising your LTV terms could help you connect with a broader audience.
- Length of loan
Suppose you’re loan terms are no more than 60 months and you want to expand your target audience without lowering the credit score range cutoff. Lost Sales Analysis can show you terms of other lenders in your market within certain credit bands to determine if a longer loan term makes sense for your customer base.
PTI works much like LTV in this situation. For example, if your maximum PTI is 18 percent, but our analysis shows other lenders loans are performing well at 20 percent, this could be another variable you might adjust.
Get actionable market data, any way you like it
Lost Sales Analysis provides a data output report, or if you have an in-house analytics resource, you can manipulate the raw data however you see fit in order to extract the unique metrics and benchmarks to address your critical business needs. Regardless of how you receive the data, this is actionable information that can be used immediately to adjust your lending criteria.
Also, there are the options of tapping our team of dedicated automotive credit experts to help you get the pinpointed market stats you need. We can help build charts and graphs and even create custom, easy-to understand dashboard views of your competitive situation.
Given today’s competitive automotive lending market, you need a solid strategy for pushing ahead of the pack. Adjusting and changing with the market is key to staying competitive. Updating and refreshing scorecards with the market-based intelligence available through Lost Sales Analysis is key to your success.
For more information about Equifax solutions for Automotive, please visit www.equifax.com/automotive